Monday, December 12, 2011

Canada - My One Tax Idea

Have you ever come up with a great idea, shared it with someone, and heard a response similar to "That will never happen..."  They say these words with the implication, that the idea is so radical, that it will never happen in reality, therefore, you should stop thinking about it immediately.

I dislike this type of thinking because it's very close minded.  Innovation is always unexpected, and great ideas can seem radical, until they are implemented.  I have a simple idea of making Canada, a one tax country.  I know it will never happen, but that is not the point, so hear me out.

The fee for living in this great country is large.  According to one source, we are the 11th most expensive place in the world to live in.  My source arrived at this, by looking at the highest income tax brackets for each country.  I don't believe this tells the whole story, as income tax, is only one of probably 50 different taxes you will pay in your life.  Property tax, sales tax, hotel tax, excise tax, estate tax, capital gains tax, dividend taxes, just to name a small few.  We pay so much tax, from so many angles, none of us know just how much tax per capita we are paying.

Over taxation, in general, is a terrible thing.  The main reason is due to the inefficiencies of government spending.  The less money the government spends for us the better because things like bureaucracy, overpaying employees, and government waste, all create an entity, that spends, and does projects inefficiently.  Pretty much any job the government can do, the private sector can do better, and cheaper.  Essential services should be there only role.   The less money the government handles, the better.

The governments of today don't share my sentiments.  In fact, every way in which they operate is counter-intuative in my opinion.  You see, you can't tax your way into good times.  The more taxes people have to pay in tax, the less they have to spend out in the real world.  If all the sudden income tax was eliminated, what would you do with that extra money?  You'd probably put it away for safe keeping right?  Wrong.  You'd spend it, because humans are natural spenders, as we all know our time on this planet is limited.  More than likely, you'd go out to eat more.  Maybe you'd buy that dream car you've always wanted, or plan to go travel the world.  All that spending, supports small and big businesses alike who are the real creators of jobs, and innovations.  The government just needs to help in areas where they belong.  Things like business quality control, labor rules, environmental responsibility, that where government can really help.

In our current tax system, there is no way our taxation rate will ever fall, it will only trend higher.  Politicians can, and will reduce taxes to appease the public, but all they will do is find another area to tax to make up for it.  There's so many taxes, you couldn't keep track of what is going up, and what's being lowered, if you tried. 

The system is designed to be confusing.  It has to be, or thousands of government agencies would be closed overnight, and thousands of longtime government employees, would be out on the street.  If we collect 50 different kinds of tax, you can bet, there is a government agency, with a government hierarchy, being paid to do the collecting.  A one tax system, would certainly aim their focus, and would cut government costs drastically.

Canada needs to be run like a good business.  We should be able to pay all our essential services, as well as have a focused, unified, government, that at the end of the day, turns a decent profit for us.  There is no justification for anything else.  We should not fall into the trap of borrowing, and pushing debts further down the line to our children.  That is the most bogus, immature way of thinking I can imagine.

We pay too much for what we get back in return.  This may sound spoiled here, but all I'm saying is the spending is done inefficiently.  With all the tax collected and paid, we deserve more than crowded hospitals, cracked roads, our terrible judicial system, and overfilled classrooms.

That's where my one tax only idea was born, and the more I think about, the more it makes sense.  The higher the tax rate rises, the better people get at working around the rules.  This applies to anyone, from people on welfare, to corporate CEO's.  If you knew just how much tax ducking went on, it would make you sick.  The government has to get their tax pool to a certain size, so when anybody ducks taxes, who do you think ends up paying?  That's right, all of us.

There should be a single purchase tax that all citizens pay on everything, but that is all they would pay.  How high this rate would be? I'm unsure, but my guess would be around 20-30%, based on todays taxation rates.  What would happen is, you would get all your money to spend each year because there is no income tax.  Any money you made on that money, you would no longer pay capital gains tax.  Instead, you would pay all your tax, up front, on all purchases.  Things like gas, liquor, cigarettes would be much more affordable because so much of their costs is taxes you wouldn't be paying. 

Under this system, the government initially, would take no more, or less taxes then they do now.  It's just no longer will people be able to duck taxes, through weird tax loopholes, or illegal activity.  Think of all the people in Canada that make their living illegally one way, or the other.  They obviously pay zero income tax.  This purchase tax would be a great way, to impose taxation on these people.  Sure they could buy some of their goods on the black market, but for a lot of the day to day purchases, they would be paying their taxes, which they aren't paying now.  Rebating low income earners would be fairly easily with one, transparent, tax.

Think about filing taxes, and how complex that form is.  How much paperwork gets pushed, and how expensive that all is.  Boom, one tax system, you don't need to file at all.  All the tax is already collected on a daily basis, and the government could make each business submit on any timeline they choose.

That's only part of the many reasons why this would make for a better system.  The transparency is it's most important feature.  You would know if you  paid 21.8% purchase tax on everything in 2010, that if you paid 22.5% in 2011 that taxes went up.  Conversly, any in-roads governments made to curb spending, could be seen by decreasing this rate.  You would know exactly how much tax, on a percentage basis, you paid that year.

I know this idea will never happen... I get that, as even I could poke 100 holes in my own idea.  I like to think I could also teardown those same roadblocks, with a little creativity.  The government has essentially become  a union.  At first, unions always start out with the interest of their people, but over time, develop into an entity that can be more concerned about it's own survival, that it's original purpose.  It's going to take a major overhaul, and some radical ideas, if we ever stand a chance at increasing efficientcy in government.  Simplifying the system would be a good start.


  1. J banging...nice post.

    Check this...maybe you've already seen it, but in case not, its kinda what you are getting at.

    I agree that there are a lot of wasted resources; I have not studied or researched this in Canada, but I know that a glaring example of governmental inefficiency is China. My dad works for the gov't and he sheepishly agrees too.

    Just curious about the gas, cigarettes etcetera getting cheaper...I thought taxes on purchases go up--not down--in this type of system?

    Also, this is such a good way to tax those pesky drug dealing' mofos.

  2. Thanks for reading Alex, and taking the time to comment. The heavily taxed items like gas, smoke, and booze, would in theory go down, because so much of the cost is already taxed.

    A $100 carton of smokes, already has $37 dollars, or 37% tax built into it. That carton would only be $67 under this system, and even adding a high rate of 30% purchase tax, you still only come out at $87.10 per carton. With a 20% purchase tax, it's only $75.60.

    So it would be anywhere from slightly to moderately cheaper, depending on the purchase tax rate.

    Keep commenting and reading!

  3. Nice stuff! Supper interesting!!!

  4. Here's a good article that speaks to my reasoning that taxes will only trend higher...